Volume : V, Issue : II, February - 2015

Financial Development and Long–Run Volatility Trends in Kerala

Neha Elizabath

Abstract :

Unfavorable disparities have occurred in the State’s fiscal profile. In spite of commendable achievement in the sphere of human development, industrial growth in Kerala has been tardy. The state economy has been portrayed susceptible to instabilities to remittances from aoad. Recently, unemployment and rural poverty have been fairly high and there has been deterioration in the setup of education, and health built up over the years. The study scrutinizes the fading financial situation in the State to recognize the problem areas. It makes numerous suggestions to perk up the revenue productivity of the tax system by rationalizing the constitution and operation of sales and excise taxes in the State. The paper finds that there have been some improvements in the fiscal position of Kerala in recent years though it continues to remain vulnerable. Besides, the State’s performance fares badly in comparison with the average of All States and many individual states. While fiscal conservatism and fundamentalism need to be avoided, fiscal prudence is still a desirable virtue. A worrying feature of the budgetary operations of the state is the very low rate of capital formation in government and the almost total reliance on borrowings for financing state’s plan outlay, the revenue component of which is ever on the increase at a time when the plan component of State’s expenditure is coming down. The participation of local bodies in the preparation of projects and plans as well as administration of plan funds is the first of its kind in Indian states. This augurs well for the economic prospects of the state. Continuance of present trends under moderate growth, as captured in the base scenario implies a deepening fiscal crisis, even while the plan has to be cut down. In this backdrop, a reform package has been suggested in the report with a view to achieving a sustainable debt to GSDP ratio and higher growth rate.

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Article: Download PDF   DOI : 10.36106/ijar  

Cite This Article:

Neha Elizabath Financial Development and Long-Run Volatility Trends in Kerala Indian Journal of Applied Research, Vol.5, Issue : 2 February 2015

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